01—Abstract
Summary
Summary of the 10-K filed February 16, 2023. Cited figures are marked; the original filing is the authoritative source.
Principal Financial Group, Inc. (PFG) reported $1,455.8 billiona in assets under administration and $635.3 billion in assets under management as of December 31, 2022.
The company describes itself as a leader in global investment management, offering retirement, asset management and insurance products through four reportable segments: Retirement and Income Solutions, Principal Global Investors, Principal International and U.S. Insurance Solutions, plus a Corporate segment. Financially, net income attributable to Principal Financial Group, Inc. rose to $4,811.6 millionb in 2022 from $1,710.6 million in 2021, primarily due to the change in fair value of the funds withheld embedded derivative ($3,652.8 million gain) tied to the Reinsurance Transaction with Talcott Life & Annuity Re, which closed in the second quarter of 2022. Total revenues increased to $17,491.6 million from $14,262.7 million.
Operating revenue trends were mixed: fees and other revenues fell to $4,177.7 millionc from $5,012.6 million, largely due to the Reinsurance Transaction and declining financial markets, and net investment income declined to $3,830.4 million from $4,406.1 million. Balance sheet and capital activity were significantly affected by 2022 market conditions. Stockholders' equity attributable to PFG fell to $10,001.7 million from $16,069.4 million, mainly due to a change in accumulated other comprehensive income (loss), which moved to a $(7,199.0) million balance.
The company returned $2,303.4 milliond to common stockholders in 2022 through dividends of $642.3 million and share repurchases of $1,661.1 million. The filing also notes that the new long-duration insurance accounting guidance (LDTI) takes effect January 1, 2023, with an estimated transition-date decrease to total stockholders' equity of approximately $5.3 billion.
02—Key points
Key Highlights
- Net income attributable to PFG increased to $4,811.6 million in 2022 from $1,710.6 million in 2021, driven mainly by a $3,652.8 million change in fair value of the funds withheld embedded derivative.
- Assets under administration were $1,455.8 billion and assets under management were $635.3 billion as of December 31, 2022.
- Fees and other revenues declined to $4,177.7 million from $5,012.6 million, reflecting the Reinsurance Transaction and declining financial markets.
- Total stockholders' equity attributable to PFG decreased to $10,001.7 million from $16,069.4 million, primarily due to a change in accumulated other comprehensive income (loss).
- PFG returned $2,303.4 million to common stockholders in 2022, including $1,661.1 million in share repurchases and $642.3 million in dividends.
- Principal Global Investors AUM decreased to $464.7 billion from $546.5 billion, with market performance of $(81.1) billion cited as the main driver.
- The LDTI accounting guidance adopted January 1, 2023 is expected to decrease total stockholders' equity by approximately $5.3 billion at transition.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 16, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $17.54B$14.43B | +21.5% |
| Net Income | $4.85B$1.76B | +176.1% |
| EPS (Basic) | $18.94$5.87 | +222.7% |
| EPS (Diluted) | $18.63$5.79 | +221.8% |
| Shares Outstanding (Basic) | 251.10M269.00M | −6.7% |
| Shares Outstanding (Diluted) | 255.30M272.90M | −6.4% |
05—Questions
Frequently Asked Questions
What drove the large increase in net income in 2022?
The filing states that net income attributable to Principal Financial Group, Inc. increased primarily due to the change in the fair value of the funds withheld embedded derivative, which was a $3,652.8 million gain in 2022 related to the Reinsurance Transaction with Talcott Life & Annuity Re.
What was the Reinsurance Transaction?
During the second quarter of 2022, PFG closed a coinsurance with funds withheld reinsurance transaction with Talcott Life & Annuity Re, ceding in-force U.S. retail fixed annuity and universal life insurance with secondary guarantee blocks of business. The economics were effective as of January 1, 2022.
Why did stockholders' equity decline significantly in 2022?
Total stockholders' equity attributable to PFG fell to $10,001.7 million from $16,069.4 million. The filing attributes the decrease primarily to the change in accumulated other comprehensive income (loss), which reflects rising interest rates and widening credit spreads on fixed maturities, alongside share repurchases and dividends.
How much capital did PFG return to shareholders in 2022?
PFG returned $2,303.4 million to common stockholders in 2022, consisting of $1,661.1 million of share repurchases and $642.3 million of dividends. The company entered accelerated share repurchase programs of $700.0 million in March 2022 and $400.0 million in August 2022.
What is the expected impact of the new long-duration insurance accounting guidance?
The filing states that the LDTI guidance, effective January 1, 2023, is expected to decrease total stockholders' equity by approximately $5.3 billion at the transition date, of which approximately $5.1 billion relates to AOCI and approximately $0.2 billion to retained earnings.
06—Continue